Critical habitat designation for the california gnatcatcher

To characterize industries that may be affected by the critical habitat designation within each of the counties' regional economies, Exhibit 2-4 provides data on county income levels, as well as the percentage of total county earnings derived from agriculture and construction.

Exhibit 2-4 COUNTY WEALTH AND FARMING/CONSTRUCTION EARNINGS (1997)
County Name	Per Capita Personal Income ($)	Total County Income ($1,000s)	Farm Earnings ($1,000s)	Farm Earnings (%)*	Construction Earnings ($1,000s)	Construction Earnings (%)*
Los Angeles	25,719	234,469,261	171,514	0.07%	6,446,561	2.75%
San Bernardino	18,673	30,035,553	163,474	0.54%	1,212,587	4.04%
Riverside	20,645	29,712,911	241,784	0.81%	1,357,784	4.57%
Orange	30,115	80,213,558	123,529	0.15%	3,308,447	4.12%
San Diego	24,965	67,997,758	219,229	0.32%	2,638,662	3.88%
*Note: Farming and construction income as a percentage of total county income. Sources: Personal Income by Major Source and Earnings by Industry, Regional Economic Information System: 1969-1997.

Exhibit 2-5 provides county-level information on small businesses in the construction industry, including total number of employees and the number of small establishments (those with 1 to 19 and 20 to 99 employees). Note that annual payroll for residential construction totals over $1 billion per year in each of the following counties: Los Angeles County, Riverside County, Orange County, and San Diego County.

Exhibit 3-1 POTENTIAL ECONOMIC IMPACTS DUE TO CRITICAL HABITAT
	Categories of Costs and Benefits	Examples
Costs	Costs associated with Section 7 consultations:  new consultations  reinitiated consultations  consultations involving greater level of effort	Administrative costs (e.g., phone calls, letter writing, meetings, travel time) and specialist consultant costs (e.g., biologists, surveyors or legal counsel).
	Costs of modifications to projects, activities and land uses.	Opportunity costs associated with seasonal change of project (e.g., activity limited to non-breeding seasons), or the relocation/redesign of project activities.
	Costs associated with uncertainty and perceptions of critical habitat effects:  changes in property values  project delays  legal costs	Transitory decline in value of undeveloped properties within critical habitat, based on the public's perception that critical habitat will result in project modifications; legal suits brought against development in critical habitat areas.
Benefits	Benefits associated with uncertainty and perceptions of critical habitat effects.	Transitory increases in value of developed properties within and near critical habitat, based on the public's perception that critical habitat will slow development and restrict the supply of developed properties.
	Recreational and other use benefits.	Improvements to wildlife viewing for local residents and visitors.
	Non-use benefits.	Existence values resulting from successful recovery of gnatcatcher, increased biodiversity, and ecosystem health.
	Improved Land Use Planning	Improvements to land use planning and permitting processes (e.g., CEQA surveys) based on the availability of a priori information describing the location of critical habitat.

Potential costs associated with Section 7 consultations due to critical habitat include: (1) the value of time and other resources used in conducting Section 7 consultations beyond those associated with the listing of the gnatcatcher; (2) opportunity costs associated with project delays and modifications as a result of these consultations; and (3) property value changes and transactions costs associated with uncertainty about the effects of critical habitat. The Service recognizes three scenarios associated with the designation of critical habitat that could trigger incremental consultation costs:

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  New consultations may be required that would not have taken place without the designation of critical habitat;
  

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  Consultations taking place after critical habitat designation may involve more effort because critical habitat issues will need to be addressed; and
  

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  Some consultations that have already been “completed” may need to be reinitiated to address critical habitat considerations.
  

Critical habitat could also result in economic costs triggered by the public's perception of the impact of critical habitat on particular land parcels subject to the designation. Perceptions held by land owners and potential buyers about changes in the attributes and characteristics of property can affect land values in much the same way as actual changes in property attributes. Public perception that critical habitat could result in project modifications may lead to a decrease in the demand for land within critical habitat. This decrease in demand could cause a real decline in property values, although the decline would likely be temporary.⁹

If property values decline, then landowners may incur costs in an effort to demonstrate that their individual properties lie outside of the critical habitat boundaries or do not contain the primary constituent elements for the gnatcatcher. The public comments received on the proposed critical habitat for the gnatcatcher demonstrated that many landowners have in fact incurred such costs. Landowners have retained legal counsel, surveyors, and other specialists such as biologists. Furthermore, the uncertainty surrounding the impacts of critical habitat designation may lead to project delays, or in some cases actual changes in land use decision-making.

In addition to considering potential economic costs attributable to the critical habitat designation, this analysis also considers economic benefits that may result from the designation. Resource preservation or enhancement, which may be aided by designation of critical habitat, may lead to an increase in "use" and "non-use" values provided directly by the species and indirectly by its habitat. Benefits related to use values include enhancement of wildlife viewing for walkers, bikers, and property owners. Non-use values include the intrinsic values associated with an increase in biodiversity and ecosystem health. Furthermore, designation of critical habitat could lead to earlier recovery of the species, thus decreasing regulatory costs associated with the listing.
The Service expects that any potential economic costs from critical habitat designation incremental to the listing of a species will occur predominantly on unoccupied lands. However, ongoing or planned activities on occupied lands may trigger reinitiations of previous consultations conducted under the listing, or in select cases, new consultations that would not have taken place under the listing. Because all lands designated as critical habitat for the gnatcatcher are occupied, this analysis considers the possibility that some new consultations may be triggered by activities on occupied lands.

Methodological Approach

As discussed in Section 1, critical habitat can only affect current or planned land uses in cases where a Federal nexus is involved. In such cases where current or future activities on state, county, municipal, or private lands involve Federal funding, Federal permitting, or other Federal involvement, Section 7 consultation with the Service is required. Activities on non-Federal lands that do not involve a Federal nexus are not impacted by the designation of critical habitat. As a result, this report assesses potential economic impacts from critical habitat designation by first identifying current and future land uses within critical habitat. Once activities have been identified, the analysis evaluates whether each activity is likely to involve a Federal nexus. Each potential Federal nexus is then evaluated to determine the likelihood of incremental consultations and the probability of resultant project modifications or other costs and benefits. Below, we describe the specific steps used in this methodology.

1. Identify those activities taking place within critical habitat for the gnatcatcher.

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  Personal Communications: Numerous Federal, state, and county agency staff involved in the management of land within the critical habitat designation were contacted by phone to identify current and planned activities and land uses and to provide data on possible economic impacts. In addition to Federal, state, and county staff, several private landowners were contacted, including developers and ranchers. Phone interviews were conducted in April, May, and August 2000.
  

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  Public Comments: Public comments received in response to the proposed critical habitat designation for the gnatcatcher on February 7, 2000, provided valuable information on potentially affected land uses and activities, as well as possible economic impacts. Public comments on the draft economic analysis were also useful in developing the final report.
  

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  Public Hearings: As part of the public comment period for the proposed critical habitat designation, public hearings were held in Anaheim, San Diego, and Riverside, California in February 2000. Transcripts of the hearings were reviewed to identify possible impacts from the critical habitat designation.
  

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  Geographic Information System (GIS) Maps: The Service provided GIS maps of the critical habitat units, displaying land ownership/management by square kilometer parcel and providing acreage estimates. The estimates were confirmed through personal communications with Federal, state, and county agency staff.
  

The Service has determined that for the gnatcatcher critical habitat designation, there are few actions or activities that would result in an adverse modification determination without an accompanying jeopardy determination. In other words, critical habitat designation for the gnatcatcher does not modify land uses and activities above and beyond modifications that already exist due to the listing of the gnatcatcher. However, governments and private landowners may nonetheless incur direct costs resulting from the designation that are not attributable to the listing of the gnatcatcher as a threatened species under the ESA. These costs include:

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  The costs due to time spent in conducting Section 7 consultations beyond those associated with the listing of the gnatcatcher;
  

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  The costs associated with delays in implementing public and private development activities (due to new or reinitiated Section 7 consultations); and
  

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  The costs associated with perception-related distortions in the real estate market due to critical habitat designation.
  

Note that this analysis of economic impacts recognizes a possible distinction between occupied and unoccupied lands within critical habitat. The Service expects that any potential economic impacts from the critical habitat designation incremental to the listing are more likely to occur on unoccupied lands. The reasoning to support this view is that occupied lands contain physical features essential to the survival and recovery of the species, therefore any economic impacts affecting occupied lands are attributable to the listing of the species (due to the ESA’s restriction on “taking” listed species) rather than to the critical habitat designation. In contrast, unoccupied lands within critical habitat may not have received similar protection under the listing as occupied habitat had critical habitat not been designated. Thus, costs associated with consultations triggered by activities on unoccupied lands are more likely to be attributed to the critical habitat designation.

This analysis, however, also recognizes an alternative view expressed by some land owners. That is, ongoing or planned activities on occupied lands may trigger re-initiations of previous consultations conducted under the listing, or in select cases, new consultations that would not have taken place under the listing. While it is certainly more plausible that new consultations will be associated with activities on unoccupied lands, this analysis considers the possibility that some new consultations may be triggered by activities on occupied lands.

Costs Associated with Conducting Section 7 Consultations on Critical Habitat
Parties involved in Section 7 consultations include the Service and the Federal agency involved in the proposed activity. In cases where the consultation involves an activity proposed by a state or local government or a private entity (the "applicant"), the Federal agency with the nexus to the activity serves as the liaison with the Service.

To initiate a formal consultation, the relevant Federal agency submits to the Service a consultation request with an accompanying biological analysis of the effects of the proposed activity. This biological analysis may be prepared by the relevant Federal agency, the state, county, or municipal entity whose action requires a consultation, or an outside party hired by the agency or landowner. Once the Service determines that these documents contain sufficient detail, the Service has 135 days to consult with the relevant Federal agency and render its biological opinion. During the consultation, parties discuss the extent of the impacts on critical habitat and propose potential mitigation strategies, if appropriate.¹⁰
The Service has recognized that there are three different scenarios associated with the designation of critical habitat that could trigger additional consultation costs:

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  New consultations may be required that would not have taken place without the designation of critical habitat. The costs associated with these new consultations include both the administrative costs incurred by the relevant agencies and the costs associated with project delays.
  

• 
  Consultations taking place after critical habitat designation may involve additional effort because critical habitat issues will need to be addressed. Service officials indicate that the incremental effort due to critical habitat is expected to be minimal in most cases, because a jeopardy analysis already will have been conducted for the proposed action.¹¹
  

• 
  Some consultations that were considered completed under the regulations associated with the listing may need to be reinitiated in order to address critical habitat considerations. The Service indicates that in the majority of cases, the reinitiation of a consultation would involve a minimal amount of effort in order to document the fact that a jeopardy analysis had already been conducted for the action. Cases where formal consultations would be reinitiated due to the critical habitat designation are anticipated to be rare.
  

Cost Associated with Project Delays from Section 7 Consultations on Critical Habitat
Both public and private entities may experience delays in projects and other activities due to critical habitat designation. Regardless of funding (i.e., private or public), projects and activities are generally undertaken only when the benefits exceed the costs, given an expected project schedule. If costs increase, benefits decrease, or the schedule is delayed, a project or activity may no longer have positive net benefits, or it may be less attractive to the entity funding the project. The costs associated with delays are equal to the decline in net benefits from a project due to the delay.
For example, if a private entity undertaking a residential development must delay groundbreaking as a result of an unresolved Section 7 consultation attributable to the designation of critical habitat, the developer may incur additional financing costs. In addition, the revenues from home sales would be pushed forward in time. Both of these effects would serve to decrease the net benefits from the residential development. Similarly, delays in public projects, such as the construction of a new park, may impose costs in the form of lost recreational opportunities. The magnitude of these costs of delay will depend on the specific attributes of the project, and the length of the delay.

Cost Associated with Perception-Related Distortions in the Real Estate Market
While the Service believes that, in most cases, the critical habitat designation for the gnatcatcher will not require additional modifications to land uses beyond those experienced due to the listing, economic costs could be triggered by the public's perception that critical habitat will lead to increased regulation of development, agriculture, or other activities. Perceptions held by land owners and potential buyers about changes in the attributes and characteristics of property can affect land values in much the same way as actual changes in property attributes. Public perception that critical habitat could result in additional restrictions on the use of land may lead to a temporary decrease in the demand for land within critical habitat. This decrease in demand could cause a real decline in property values.
This decline in property values would likely be temporary, as market participants would learn over time that critical habitat designation generally does not, in fact, impose restrictions above and beyond the restrictions due to the listing of the species. However, during this period of uncertainty, costs will be incurred, including:

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  The costs associated with projects that are delayed or moved to areas outside of critical habitat due to the uncertainty regarding the restrictions associated with critical habitat. The costs due to delay are equal to the decline in net benefits of the project as a result of the delay. The costs due to relocating a project are equal to the difference between the net benefits of the project when located within critical habitat and the net benefits of the project in the alternative location outside of critical habitat.
  

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  The costs incurred by landowners in an effort to demonstrate that their individual properties lie outside of the critical habitat boundaries or do not contain the primary constituent elements for the gnatcatcher. These costs include the cost of retaining legal counsel, surveyors, and other specialists.
  

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